Empowering design through cost optimisation: Driving savings in the fashion industry

The fashion industry has historically used traditional procurement methods, including relying on long-standing supplier relationships and tactical approaches to sourcing. Our client, a manufacturer of medical scrubs, recognized an opportunity for cost reduction in transitioning to strategic procurement. 

The client’s goal was to achieve 10% savings on trim spend through strategies including SKU consolidation, strategic negotiations, and supplier location optimization. The client brought Efficio on to pilot strategic sourcing within the trims category, an often-overlooked category that presents good opportunities for savings.  

Approach

Improving internal cross-functional relationships to consolidate SKUs

“In the fashion industry, the business of cost reduction versus the business of making beautiful items are often at odds,” says Senior Consultant Sam Stern. “With it being such a visual industry, there is a desire to get that one special item, so the supplier base tends to be very large.” 

For our client, developing stronger relationships between Procurement and Design was crucial to trim consolidation. A key part of this process was to evaluate new items and consolidation potential as a cross-functional team. All suppliers received physical samples of high-spend SKUs to recreate and return to the client to evaluate. Approaching the design team with physical samples helped overturn preconceived notions of certain vendors and win buy-in for alternative, more cost-effective suppliers. This also helped the team to eliminate suppliers with poor-quality products ahead of negotiations and test suppliers’ development lead times and communication.

The team also paved the way for future cost savings. In fashion, trends change quickly. New developments, such as a new zipper, could mean missing out on savings. To future-proof against these potential leaks, the procurement team equipped the design team with a trims costing toolkit, mapping out vendors and expected price ranges for new developments. 

The client-Efficio team cut down 1,400+ trim SKUs to under half the number, at 600. Consolidating SKUs aided in negotiation leverage and targeting supplier locations helped reduce shipping costs and lead times. 
 

Improving supplier relationships 

The client faced challenges with vendors due to the long tail of low-spend suppliers that did not benefit from the relationship. The client also struggled to provide suppliers with accurate and regular forecasts, instead tending to make ad hoc requests, which put an additional strain on relationships. The team rolled out changes to improve supplier relationships:

1. Consolidating suppliers to increase spend with key partners
2. Developing an annual trim forecast using a combination of existing forecasts and historical data to build transparency around volumes and orders upfront

Focusing on relationships with fewer suppliers and being upfront with annual forecasts meant suppliers were more open to negotiations and long-term partnerships. 
 

Location optimization

Certain countries are the go-to source for certain raw materials. However, when you ship materials across long distances, export duties and shipping costs can quickly add up. The client-Efficio team recognised an opportunity to move secondary suppliers closer to garment factories; this also helped to cut down on production lead times.

Altogether, transitioning to this strategic sourcing approach delivered 12% in annualized savings on trim spend for the business.